*1 Lederer, anywhere. DeGanay ubi pletely supra.
, Supreme Court of The judgment Tennessee reversed and the case remanded should be to that court in accordance with opinion. proceedings for further McReyn- Hughes, Mr. Justice Justice Chief Mr. join this opinion. Roberts Justice olds GRAVES et COMMISSIONERS CONSTITUTING al.,
THE STATE COMMISSION OF NEW YORK, TAX ELLIOTT et al. Term, Argued January 9, October 1937. Reargued No. May
April 28, 1939. Decided 29, 1939. *2 Harry Mr. T. Kassell, whom with Mr. Mortimer M. . reargument and on brief, on O’Brien, Jr. on the petitioners. for original argument, and on the reargument on the Bangs, Mr. Frederick C. respondents. original argument, for Wilentz, Attorney David T. Court, Messrs. By leave Moore, At- A. Assistant Jersey, New William General of . Dever, Attorney General Paul A. torney General, Long brief, a as amici Henry F. filed Massachusetts, and petitioners. States, support curiae, those behalf of on Court. opinion of the Stone delivered Justice of New say whether the State We are asked to relinquishment by constitutionally tax may state, a hf to revoke of the resident domiciled .a a Colorado trustee. of intangibles trust held trans- Colorado, resident of 1924, while a Decedent in Denver, Bank of Denver National delivered ferred and trusts specified to be held certain bonds Colorado, to administer the trustee powers with specified far trust fund. So and reinvest and to invest provided indenture material, the trust as now daughter income to decedent’s over the pay trustee should until daughter’s children to the life afterward each had reached twenty-five age years, when proportionate principal share of the trust fund was to be over In paid to such child. default of such children the principal pass was to revert to decedent and under her will. She to remove the right reserved the trustee, change any trust, and to re- beneficiary voke the trust revest herself with to the the title property, undertaking assign trustee in event and deliver to her all the constituting securities then trust fund.
After creating the trust decedent became and remained a domiciled York, resident of where she died without new beneficiaries of the trust appointing it. revoking Until her death the trust was administered bank in Colorado, at its offices and the evi- paper . dences of intangibles corporate comprising — bonds— *3 the trust fund in the the possession remained of trustee ip Colorado.
Following her death the authorities of Colorado assessed a tax on the transmission at death of the trust in York Proceedings fund. New for the assessment of taxes estate on transfer of the trust fund at decedent’s in order of death resulted the Surrogate an confirming under 249-n, assessment 249-r of the §§ New York Tax Laws, Law. Consol. ch. 60.1 On appeal the New York 1 imposes specified 249-n tax at net rates estate of § every person dying a of the state. For purpose fixing resident of estate, amount of the net 249-r includes in the value of § gross property estate of the decedent the value of all of the decedent “except property tangible personal situated and property 'real having outside, state,” situs actual any
“3. To the extent of interest therein of which the decedent any transfer, by otherwise, has at time made a trust or in contem- plation possession enjoyment or intended to take effect in or at or death, including after his a transfer under which the transferor has any period ending retained his life or (a) before his death enjoyment of, or possession from, the income property 386 Surrogate, of the the order Appeals reversed
Court of the New provisions far as the holding that so intangible to include purport Tax Law infringe process imposing due they in estate gross situs is outside the 274 whose state. tax on granted 14, 1938, certiorari November 10. We N. Y. being public importance. involved question question presented of the The essential elements yhere McCanless, Curry in as those considered v. are the same out, power of ante, pointed dispo- is there 357. As p. equivalent ownership. It is a is the sition of . wealth and its exercise the case potential source of at appropriate of taxation intangibles is power. domicile of the owner place consequence of the non-exer relinquishment by a trust created of a to revoke a life, cise subject of taxation. appropriate is likewise decedent Saltonstall, 260; U. v. 276 S. Reinecke Saltonstall v. Helvering Co., 339; City S. U. Trust Northern Co., 85; Keeney v. 296 U. S. cf. Trust Bank Farmers Wisconsin, 240 U. S. York, 525; U. S. Bullen States, 278 United U. S. Bank v. National 625; Chase States, 497; Guaranty 281 U. S. Tyler v. United 327; 509; Commis 287 U. S. Porter v. Blodgett, Trust Co. v. sioner, 288 U. S. opinion v. McCan Curry stated our
For reasons say interest of de less, we cannot supra, intangibles held in trust Colorado was so cedent in the *4 designate persons possess enjoy or who shall right (b) to therefrom; ... income which any therein of the decedent has interest the extent “4. To otherwise, enjoy- by transfer, trust or any made time at change any his death to the date of was thereof ment power, either the decedent alone or of a through exercise alter, amend, revoke, any person, dr to . . conjunction with .” person dissociated her to beyond be the jurisdiction of the state of her domicile more than her rights other in intangibles. Her right to revoke the trust and to demand the transmission intangibles to her by the trustee and the delivery her physical to of their evidences was a potential source of wealth, having the attributes of property. As in any the case of other in- tangibles which she control possessed, over her person and estate at the place of her domicile her duty contribute the support of government there afford adequate constitutional basis for imposition of a tax measured by the value of the intangibles transmitted relinquished by her at death. Curry McCanless, supra, and cases cited.
Reversed. Me. Chief Justice Hughes, dissenting.
I think that the decision in this pushes case the fiction sequuntur personam mobilia to an unwarranted ex- treme and thus unnecessarily produces unjust result. subjected
The same to an inheritance or transfer tax States. The two decedent, while a resident of Colorado, created a in certain securi- ties, consisting federal, state and other bonds. The was a Denver bank. The trustee income of the trust payable to the daughter settlor’s during her life and thereafter to her children until they respectively age twenty-five arrived at the years, when they were equal have principal shares. If the daughter left no children, the trust estate was to revert settlor. The settlor reserved the right change the beneficiaries, to revoke trust, and to remove the trustee.
title to the securities was thus vested in trustee, which entered its administration and continued it both *5 ' revo- There was no death. after settlor’s before and or change beneficiary trustee, cation the trust daughter, income the use and diversion of all when- the settlor died. living were the beneficiaries to New York. settlor removed Prior- her An continued to be Colorado. inheritance The trust res Colorado, property situated the decedent’s upon tax in trust, imposed held there including the bonds and of Appeals The York Court has held, State. by that property was not rightly, I that this trust think 274 N. in New York. Y. 10. tax subject to estate the Constitution of United States It true is against double but specific provision taxation, no contains impose limitations the tax- does the Constitution are' I applicable which think a State ing power exaction this should a double case. prevent application of the due governing principle clause, of Fourteenth Amendment to the process is well established. That principle, State’s Court, and not apparently repeatedly declared "essential the validity now, is that it disputed be within jur- shall the territorial tax that taxing power.” Union Transit Co. v. isdiction of Kentucky, 199 U. S. What is meant is that due requires that the property be in taxation shall process domain which State imposes to the attributable familiar most illustration This rule has its in the the tax. within taxable, to be must be which, of land case The fact that taxing State. owner is limits elsewhere, the land is State, does within domiciled In authority to tax. of his domicile State give the Kentucky, supra, we held Transit Co. Union of land within taxability another against principle equal cogency tangible per- applies with jurisdiction an actual outside the having situs State’s sonal maxim mobilia expressed the fiction True, domain. justify such have sequuntur might seemed personam, of the owner’s the State personal property a tax on Pennsyl Car Co. as said Pullman’s domicile. *6 in expressed the rule, 141 22: old vania, S. 18, U. “The which personal sequuntur personam, maxim mobilia. the law of the Owner’s subject to regarded as property prop movable Ages, when in the Middle domicile, grew up be consisted, which could gold jewels, of and chiefly erty place place, or secreted the owner easily carried times, In modern since himself. only to spots in known prop variety personal of in amount and increase great of person with the immediately not erty, connected more to the lex yielded more and has owner, that rule kept is where the situs, place law of the used.” of owner’s thus established that State
The rule
tangible
which has
personal property
cannot tax
domicile
by this Court
applied
in another State was
an actual situs
transfer tax in the case of Frick v.
an inheritance
held,
There
Court
with
As we & said Virginia, Trust Co. v. Safe *7 U. S. fiction 83, 92, sequuntur the of mobiiia personam yield “must to established fact of legal actual ownership, presence ought and control elsewhere, and not to be ap if plied do inescapable so to would result patent and injustice, through whether double taxation or otherwise.” that In case, a resident Virginia had transferred cer tain Deposit securities to the Safe & Trust Company of Baltimore in for trust his minor sons. The donor reserved to himself power a He revocation. died hav without ing exercised it. Virginia undertook to impose ad upon valorem tax the corpus entire the trust estate and Court held that as the subject were to tax securities in Maryland, ation they where were the actual posses of the trustee, sion the holder of legal title, they had legal no situs taxation in Virginia, legal “unless sequuntur fiction personam mobiiia applicable was [is] controlling.” The Virginia and court had held that conjunction two beneficiaries with the administrator really the father’s estate owned the trust fund and that by reason of the its fiction taxable situs followed them. to accept right This that view and refused denied Court unfortunate, saying: of taxation “It would be Virginia, to legal fiction to perhaps amazing, originally a invented n just taxation, prevent personalty escaping should compel us to irrational same accept the- view were securities within two States at the same instant and uphold because of oppressive this to a double and (cid:127) assessment.”
That was case of an tax. ad valorem impose tax, as power inheritance or transfer impose tax, well as the power an ad valorem attributable depends upon property being Pennsylvania, supra, domain Frick v. taxing State. p. 492.
In case, instant title to question the Colorado created is in the trust was trustee, administration, under the Colorado law and its. To say the control Colorado. these securities
are effectively were Colorado, as as Mr. Erick furniture, pictures and other treasures of art York New alone Massachusetts, their trans- fer taxed, ignore could be and to would be realities make important rights turn a verbal distinction. it
Upon ground what these then is maintained that securities are within of New York? taxing power it Solely, appears, upon, the ground that the indenture creating in Colorado reserved to settlor power of revocation. This unexercised is treated by the as carried settlor into hence *8 bringing in its train the entire of corpus prop- erty. That as the fiction results, already giving in noted, oppressive an operation. aside from But, practical that aspect, through the trust in Colorado have the securities been effectively in an why State, that should unexercised power of revocation alter their status? Frick did not even for at instrument, need to an revoke
any time he have removed his furniture and art could to treasures from New and Massachusetts his domi- Pennsylvania. while cile that obvious control^ of unexercised, power did detract from the not was, States where taxation the'property permit domiciliary State. that power disposition equivalent It is said is relinquishment that its death is ownership, subject of taxation. appropriate The case federal tax- analogous ation there is not are no state boundaries ,are be considered when the tax is Nor federal laid. state when there no attempted cases relevant is extraterritorial statute, application a state and it is necessary not again to review the cited dissenting opinion authorities ante, McCanless, p. present Curry v. For pur- that pose it sufficient to note under is the principle estab- Pennsylvania, Frick it is enough say lished not is disposition equivalent that a power for ownership, a a gives resident of' State ownership State no authority to tax to its attributable domain. owned his property Mr. Erick New York and Massa- Pennsylvania still his own State of chusetts but could not tax its transfer.. question
The fundamental is thus not one a reserved but unexercised of revocation or an ultimate n owner, but whether securities, control in an classed as necessarily are and in intangibles, all circumstances sub- from that ject to different rule obtaining case of It is tangible personal property. not perceived that there is a sound basis such invariable distinction, which thought is common foreign practical needs. When with question as to tangible personal confronted prop- not hesitate to limit erty, we did the application of the regrettable it fiction, and we can not deal with the. ,as in such fiction in similar fashion a case this, *9 through securities localization have an effective we than that the settlor’s in. a State other trust created that other the time of domicile at and has been possession holds title and the trustee State to its laws. administering the of Appeals of the Court judgment I think be affirmed. York should and' Mr. Justice Butler McReynolds, Mr. Justice opinion concur Roberts Mr. Justice PACIFIC CO. UNITED STATES. SOUTHERN May 29, Argued March 1939. Decided No. 613. R. Bell James petitioner. for.